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DJ Global Forex and Fixed Income Roundup: Market Talk

· 02/05/2021 10:33

The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

1033 ET - Canadian employment fell by a much steeper number than traders anticipated, down 212K versus expectations for a 46K drop. The unemployment rate also shot up, to 9.4%. That said, elements of the employment data suggest the hit to GDP won't be too pronounced. Most important, hours worked rose in January, 0.9%, after a 0.4% drop in the previous month. This can be attributed to hiring in the construction, financial-services and health-care sectors, as all the job losses were in the part-time category and concentrated in sectors most affected by shutdown orders in Canada's two most populous provinces, Ontario and Quebec. The increase in hours worked were likely in high-productivity sectors, CIBC Capital Markets says, which suggests any decline in 1Q output "could be modest." (paul.vieira@wsj.com; @paulvieira)

1022 ET - While Intesa Sanpaolo swung to a net loss in the fourth quarter on higher-than-expected restructuring and impairment charges related to the acquisition of UBI Banca, underlying earnings trends came in above projections, KBW says. This was due to a strong fee income, which beat market consensus by 12%, KBW says. The Italian bank's capital ratio is also strong, KBW says, and notes that the bank reported a consensus-beating CET1 ratio of 15.9%. "The CET1 ratio increased quarter-on-quarter despite the capital hit from the usage of the UBI badwill and a slight increase in risk-weighted assets, so the beat seems to be explained by lower deductions," the investment bank says. KBW has an outperform rating on the stock. Intesa Sanpaolo trades 3% higher at EUR2.07. (cecilia.butini@wsj.com)

0956 ET - The progress of vaccination and the government's Covid-19 relief programs should continue to drive the recovery and lead to higher job gains in the coming months, Christoph Balz, senior economist at Commerzbank, says. In contrast to the eurozone, a relapse into recession is unlikely, but the employment the U.S. enjoyed before the pandemic is a long way off and the official unemployment figures understate the extent of the issue, he says. "Wage pressure and thus underlying inflation are likely to remain low for at least the next year or two," Balz says. (xavier.fontdegloria@wsj.com)

0946 ET - The 49,000 rise in U.S. payrolls in January is weaker than anticipated, but the job creation pace should improve in the next months as Covid-19 related restrictions ease and the vaccination program gains momentum, James Knightley, ING's chief international economist, says. February's report should be better given that the California re-opening is underway, while the March release should also see the effect of New York restaurants reopening for dine-in, he says. "That said, we aren't going to get meaningful improvements in the labor market until Covid-19 containment measures are lifted on heavily impacted sectors such as travel, leisure and hospitality," he says, something that is likely to be several months away. (xavier.fontdegloria@wsj.com)

0944 ET - January's jobs report brings a drop in the jobless rate to 6.3% from 6.7%, but that "is nothing to get excited about," Pantheon Macroeconomics says. The research firm says "the modest 10K increase in private services jobs, after a 280K drop in December, seems reasonable," since December bore the brunt of new Covid restrictions. "The labor market was frozen at the start of the year," Pantheon says, adding that fully recovering the pandemic's 10M-plus job lost won't happen "until the economy can reopen more fully and people are confident in mingling again." (paulo.trevisani@wsj.com; @ptrevisani) Corrections and Amplifications

This headline was corrected at 9:55 a.m. because it incorrectly said there was a lower jobless rate fall. The headline should read "Lower Jobless Rate 'Nothing To Get Excited About' -- Market Talk."

0920 ET - The January nonfarm payrolls report "illustrates that the recent wave of COVID-19 cases is still weighing on the economy," Capital Economics says. "But with infections now dropping back sharply and the recent fiscal boost set to feed through, we expect employment growth to rebound over the coming months." The Labor Department says 49K jobs were added last month, just under the 50K consensus. "The weakness last month was more widespread, with manufacturing, retail, transportation and health care all losing jobs," CE says. The 10-year yield rises to 1.19%, its highest level since March, following the jobs report. (paulo.trevisani@wsj.com; @ptrevisani)

0856 ET - The hard-hit restaurant and bar sector lost a further 19,000 jobs in January, Labor Department data shows. Increased coronavirus restrictions have badly hurt full-service restaurants and some chains that depend on indoor dining. Overall, employment in restaurants, hotels and the larger leisure and hospitality sector is down by 3.9 million, or 22.9 percent, since last February. (heather.haddon@wsj.com; @heatherhaddon)

0850 ET - The dollar falls, sending the euro and sterling higher, after U.S. non-farm payrolls rose by slightly less than expected in January, while December's data were revised lower. Employment increased by 49,000 in January, compared to a forecast for jobs growth of 50,000 in a WSJ survey of economists. The unemployment rate, however, unexpectedly fell to 6.3% from 6.7%. The DXY dollar index falls to 91.2790 after the data, from 91.4250 beforehand. EUR/USD rises to 1.2004 from 1.1987 before the data and GBP/USD climbs to 1.3713 from 1.3689. (renae.dyer@wsj.com)

0840 ET - The U.K.'s departure from the EU has hit retail trade between the two territories as delivery delays and extra charges deter consumers, according to a study. More than a third, or 34%, of U.K. consumers have stopped purchasing EU goods since the country left the bloc last month, the survey of 1,000 U.K. consumers commissioned by cyber-security marketing specialist Eskenzi PR & Marketing shows. Higher costs, such as extra credit-card fees, sales taxes and customs duties, and delays were the biggest concern for younger consumers. "U.K. consumers are being put off buying goods from the EU due to the various complications Brexit has created," says Eskenzi co-founder and director Yvonne Eskenzi. (philip.waller@wsj.com)

0831 ET - Gilt investors' bets that the Bank of England's next move could be to soften current stimulus have propelled the 10-year gilt yield to a 10-month of 0.484% Friday, according to Tradeweb. An unexpectedly hawkish BOE meeting Thursday triggered an immediate gilt selloff. "With the Monetary Policy Committee expecting growth and inflation to recover swiftly and rethinking its balance sheet exit strategy, the overall message seems to be that the next policy move is more likely to be a tightening than an easing," says BNP Paribas's Paul Hollingsworth, adding that the investors' focus has now moved to the duration of monetary support. (lorena.ruibal@wsj.com)

0819 ET - U.K. housing stocks trade mixed after industry data showed house prices falling slightly in January, with early signs that the market could start to cool. January house prices were 0.3% lower than in December, though 5.4% higher than in January a year ago, according to mortgage lender Halifax. The monthly drop was the biggest since April last year and the annual rate of house-price inflation eased to its lowest since August, Halifax says. "Industry agreed-sales figures remain well above pre-pandemic levels, but new instructions to sell have decreased noticeably," says Halifax Managing Director Russell Galley. Barratt Developments, Taylor Wimpey, Persimmon and other builders gain, but estate agents such as Rightmove and Countrywide fall. (philip.waller@wsj.com)

0813 ET - Long-term Treasury prices fall ahead of a closely watched January jobs report, sending the 10-year yield up to 1.165% from 1.140%. The current level is the highest since March, amid expectations that 50K jobs were added last month, following disappointing 140K job losses in December. While Covid-19 restrictions keep a lid on employment, there's room for optimism as vaccination advances. Amherst Pierpont's Stephen Stanley expects that 300K jobs have been added. "I doubt that restaurants would have implemented further sharp job cuts last month," he says. "Other sectors...likely continued to exhibit strength." (paulo.trevisani@wsj.com; @ptrevisani)

(END) Dow Jones Newswires

February 05, 2021 10:33 ET (15:33 GMT)

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